Speech
before the Los Angeles World Affairs Council on September 25, 2000:
Ambassador
Charlene Barshefsky
U.S.
Trade Representative
TRADE POLICY
1992 - 2000:
THE CLINTON
RECORD AND THE ROAD AHEAD
Thank
you very much.
We are here at one of a few genuinely historic
moments in American trade policy. With
the Senate's passage of permanent Normal Trade Relations for China last week, we
close the book on perhaps the central issue in American trade policy in this
decade. I am not going to dwell on
the PNTR debate today -- we have probably all heard enough about it for the time
being -- but I begin here because it gives us a point of departure for a broader
discussion.
Think back on the themes we saw play out in Congress
over the past eight months during the China debate - the economic opportunities
a more open Chinese economy would offer to Americans on the job and on the farm;
the implications, both economic and political, of China's opening of its
telecommunications markets and the Internet; the insecurities of the world
economy and the interplay between trade policy and other values; ultimately, the
central place the WTO accession and PNTR took in the broader American
relationship with China, with its implications for American foreign policy and
Pacific security.
These are, in microcosm, the themes of America's
broader trade debates across the past eight years. From the beginning of the Clinton Administration, trade
policy had a central place in America's response to the great questions:
prosperity at home; the technological revolution; social justice and the quality
of life; the quest for peace in the aftermath of the Cold War. And today I would like to look back on these years, and then
give you some thoughts on the challenges of the moment and the tasks of the new
decade.
PRINCIPLES OF
U.S. TRADE
POLICY
Much of my remarks today will be a story of change -
from the physical growth of trade and international investment as part of our
economy, to the adaptation of policy to a new era. But let me begin with a set of principles: a philosophy
advanced anew by the Clinton Administration, but first articulated in the era of
Franklin Roosevelt.
American postwar trade policy, stated simply, has
aimed to build a world of open markets under the rule of law.
This commitment rests on clear economic logic.
Open markets abroad enable us to export, and exports are essential to a
strong domestic economy: giving producers wider market opportunities and helping
working people specialize in high-skill, high-wage jobs.
Open markets at home are equally important, as imports create the choice,
price and competition that raise family living standards -- for all families,
but most especially the poor, dampen inflation, and create the competition and
efficiency that mean long-term growth. But
our approach also relies, as much as on logic and theory, on practical
experience with the alternative.
HOOVER AND
ROOSEVELT
Our modern views on trade policy can be traced,
appropriately enough in this election season, to the debate between Roosevelt
and Herbert Hoover in the Presidential campaign of 1932.
President Hoover's trade policy had rested on the
belief that -- as Hoover himself put it, calling on Congress in 1929 to pass the
Smoot-Hawley Tariff Act, that America, with its high standard of living,
"cannot successfully compete against foreign producers because of lower
foreign wages and a lower cost of production." This is an argument which
appeals to very powerful fears -- today just as then. To date they have not prevailed, but in 1929 and 1930 they
did, and the result is still remembered today: a cycle of tariff hikes and
retaliation which, spreading around the world under the pressure of financial
crisis, cut trade by 70% between 1930 and 1933.
The result deepened and lengthened the Depression, intensified the
political tensions of the era and, in the view of our postwar leaders,
contributed to the outbreak of war.
Roosevelt proposed a more generous, confident and
also more sustainable philosophy, which we have maintained ever since - a
commitment to reopen world markets with the twin goals of rebuilding prosperity
and restoring peace and stability. As
he wrote in his last message to Congress, as the end of the Second World War
approached:
"The point in history at which we stand is full
of promise and danger. The world
will either move toward unity and widely shared prosperity, or it will move
apart... We have a chance, we citizens of the United States, to use our
influence in favor of a more united and cooperating world.
Whether we do so will determine, as far as it is in our power, the kind
of lives our grandchildren will live."
This message called for the opening of the
negotiations which led in 1947 to the creation of the global trading system,
then called the GATT and now known as the World Trade Organization -- in 1947.
Roosevelt called the GATT initiative a chance to "lay the economic
basis for the secure and peaceful world we all desire;" and when we step
back for a moment, we see that he was correct.
Since that first GATT agreement, trade has expanded
fifteen-fold; the world economy grown six-fold; and per capita income nearly
tripled. Together with this, and of
course also owing much to the accelerating progress of science and medicine, the
past decades have seen an unprecedented era of social progress.
Since the 1950s, world life expectancy has grown by twenty years; infant
mortality dropped by two-thirds; and famine receded from all but the most
remote, war-tom or misgoverned comers of the world.
And in political terms, trade policy has helped us address questions
central to world peace: postwar reconstruction and the reintegration through the
GATT of Germany and Japan in the 1950s; and the contemporary challenge of
supporting economic reform and integration with the world for nearly 30 nations
breaking with communist central planning.
THE CLINTON ERA
AND THE CHALLENGE OF 1992
The Clinton Administration embraced this philosophy and its underlying
premises - optimism about America's ability to succeed in a demanding and
rapidly changing world; appreciation of the contribution open markets and the
rule of law can make to prosperity, justice and peace - but applied them to an
entirely new economic and political landscape. In setting out his trade agenda
at American University, a few weeks after his inauguration in 1993, the
President observed that trade policy would have to be fundamentally reshaped,
for a world fundamentally changed:
-America's
economic leadership was under greater question that ever before, with a sharp
recession, persistent fiscal deficits, and a perhaps subjective but clear waning
of the public's confidence in America's economic future.
-The
revolution in science and technology was changing commerce, work and daily life
before our eyes; trade policy would have to change with it.
-The
domestic debate on trade policy was growing more intense as trade became more
important to the economy, meaning that all our initiatives would proceed under
much more intense scrutiny than at any time perhaps since the era of Roosevelt
and Truman.
-The
world's political landscape had been irrevocably transformed, as the end of the
Cold War, in lessening political and military tension, placed economics and
trade more clearly at the center of relationships between nations.
These were a new set of challenges; this was a different world; and it
required new thinking. As in the
early days of the postwar era, it was a moment at which the world could unite or
drift apart. And thus the President
asked more of trade policy, and set a more ambitious agenda, than any
Administration perhaps since those of Roosevelt and Truman.
Our
work has proceeded continuously from those very first days to the present.
It has spanned the negotiation by the United States of 300 separate trade
agreements since 1992, eight of them of historic nature - NAFTA, the Uruguay
Round, the global 2 1 "-century agreements to open markets for information
technology goods, financial services, basic telecommunications; duty-free
cyberspace; more recently the landmark bilateral market access agreements with
China and Vietnam. We have launched more than I 00 enforcement actions.
Together with the Congress, we have passed five major pieces of trade
legislation. And when we compare
the challenges of 1992 to the realities of today, we see how central a place
this work had in our country's contemporary history.
1.
BUILDING PROSPERITY AT HOME
First, over the past eight years America regained its
economic strength; and the expansion of trade, together with fiscal discipline
and strengthened support for education, deserves substantial credit for this.
Today's world economy is more open, and in a more
open world Americans have succeeded. Since
1992, our trade negotiations have cut world tariffs by more than a third, and
virtually eliminated them on information technology goods, pharmaceuticals and
other highvalue products; placed industrial quotas on the road to elimination;
imposed stricter checks on foreign subsidies; opened markets in areas of special
competitive importance to the United States; and, through NAFTA, cemented our
economic relationship with our closest neighbors and largest trading partners.
Thus American businesses, farmers and working people
can sell their goods and services overseas more freely than ever before.
We see this as, over eight years, U.S. exports have expanded by 74%, or
nearly $500 billion. In practice, this means tangible new opportunities for people
on the job and on the farm throughout the United States:
Until this year, California's orange growers were
barred from selling their crops in China. As
a result of the Agricultural Cooperation Agreement we negotiated with China in
1999, China bought over 6 million kilos of U.S. oranges in the first six months
of 2000. In 1993 American
photographic film and paper companies sold just over $1 00 million worth of
their goods to Mexico. With NAFTA
in effect and Mexican tariffs on these products on the road to elimination, U.S.
exports of film and photographic paper more than tripled to $342 million by
1999, and may approach $500 million this year.
In the early 1990s, California's semiconductor firms found Japan one of the
world's most difficult markets to reach; today, as foreign market share has
doubled in the aftermath of our semiconductor agreement, they are Japan's market
leaders.
On a national scale, this export growth has made up
one fifth of America's overall growth since 1992. At the local level, it has helped Americans find better and
higher-paying jobs, as jobs related to goods exports pay on average 13-16%
higher than other jobs. Thus, as
America has created jobs, the opening of trade has helped make sure Americans
also have better jobs.
Equally important, though less often recognized, are
the benefits we have drawn from a more fully open domestic economy.
The work of the past eight years has also reformed our own trade regime:
for example, we have nearly eliminated our non-tariff barriers like industrial
quotas, and abolished tariffs on over two thousand types of goods.
This has helped make businesses more efficient; kept inflation low as the
longest continuous economic expansion in our history continues; broadened
consumer choice and raised living standards, especially for America's poorest
families.
Altogether,
trade has played an irreplaceable role in America's prosperity. - and we are all
familiar with the overall economic record: 21 million new jobs since 1992; the
lowest peacetime unemployment rates since the 1950s; a $400 billion expansion in
American manufacturing; the longest era of economic expansion in our history.
11. THE
21 ST_CENTURY ECONOMY
As the opening of the contemporary world economy
helped us build prosperity at home, we initiated a new set of agreements --
unique in postwar trade policy -- that eliminate barriers in specific sectors
worldwide, and in doing so develop the framework of rules that will serve
America's 2111-century economy. These
are the issues and approaches of the New Economy, and the Clinton Administration
took them up as no previous Administration had done:
We strengthened worldwide protection of intellectual
property rights, giving American scientists, artists and inventors stronger
incentives for research and development. Through
the Uruguay Round negotiations, dispute settlement cases, our domestic law and a
host of bilateral IPR agreements, well over I 00 countries have adopted modern
copyright, patent and trademark laws.
We have opened broader markets for American high-tech
manufacturers that create economies of scale and promote investment: Over eight
years, beginning with bilateral market-opening agreements ranging from
semiconductors to cell phones, medical equipment and technology, computers,
pharmaceuticals and other advanced products and then conclusion of the global
Information Technology Agreement in 1 996, we have virtually eliminated world
tariffs on the high-tech manufactured goods at the heart of the globe's
information infrastructure.
We have begun the opening of the services industries
critical to the world's 2 1 -'t-century economy: beginning with the global
agreement on Basic Telecommunications services in early 1997, we brought the
pro-competitive regulatory principles and open markets that spark investment and
competition in America's telecommunications sector to the world.
We then did the same for another industry through the global Financial
Services agreement later in that same year - the largest market-opening trade
agreement by value ever concluded, covering nearly $60 trillion in banking,
securities and insurance.
Then the Internet, as in 1998 --
in association with our opening of a very broad electronic commerce initiative
-- we won commitment from all WTO members to duty-free cyberspace, preserving
the Internet as a duty-free zone.
And we are now taking the next steps.
At the WTO, we have tabled a comprehensive proposal to reform trade in
agriculture -- still a highly protected sector, especially in Europe.
We have done the same in the services industries, moving on to such
industries as distribution, the newly emerging services created by the Internet,
as well as telecommunications, financial services, architectural design and much
more. And we will soon announce a
major "networked economy" initiative to move our trading partners
toward the flexible, sophisticated New Economy principles of America's network
of telecommunications, information technologies and services industries.
Altogether, as the technological revolution accelerates, we will have the
advantage of a framework of law and open markets that enables Americans to take
full advantage of our greatest strengths.
111.
THE DOMESTIC DEBATE AND THE QUALITY OF
LIFE
Altogether, an aggressive trade agenda helped to
propel a remarkable transformation in America's economic life.
This is evident in the sheer physical growth of trade - since President
Clinton spoke at American University in 1993, our trade with the world has
doubled, from under $1.3 trillion to over $2.5 trillion a year.
And as he then predicted, this in turn brought greater attention to trade
and intensified the public debate on trade policy.
This has required us to make some changes in the way
trade policy is conducted; and anticipating this, early in the Administration,
we made a number of reforms in our domestic policy processes to strengthen the
government's public outreach and encourage public participation as we form new
policies and negotiate major agreements. We
are now broadening this internationally through our call for greater
transparency at the WTO, and the creation of a unique "Committee on Civil
Society" in the Free Trade Area of the Americas talks.
But an intensifying debate also means more substantive questions and
concerns that must be met.
Some of these concerns reflect insecurities at home;
and they are quite valid, though not uniquely associated with trade.
Some parts of American society have not drawn the full benefits of our
modern prosperity: inner cities and Indian reservations; those with less
education and training; much of rural America.
Government has a responsibility to accompany rapid technological change
and an open trade policy with a full range of domestic policy measures including
a commitment to the education, job training, and adjustment necessary to ensure
that all of us can take full advantage of newly emerging opportunities; and a
safety net that will assist those in need.
Other concerns are more directly linked with trade:
an example is the debate, playing out in the Congress and sometimes on TV, on
the relationship between trade, environmental protection, and worker rights.
The most basic fears it embodies - that an opening world economy will
force us to weaken standards or face the loss of exports, investment and overall
prosperity - are not borne out by experience.
Far from weakening standards under the pressure of competition, we have
strengthened them, with the Family and Medical Leave Act, the minimum wage
increase and the new Safe Drinking Water Act; new and stronger clean air rules;
signature of the Kyoto Convention on climate change; the protection of nearly I
00 million acres of wild lands; and as we have done so America became more
competitive rather than less. But
the critics of trade raise genuine and reasonable concerns: sweatshops and child
labor are real global problems; the climate change, loss of habitat, depletion
of fisheries and cross-border pollution all present real challenges; and while
domestic policies must be the central means of solving them, trade can play a
part.
This has been the Administration's commitment from
the beginning. We now require full
environmental assessments of major trade agreements before their completion; we
have identified and proposed the elimination of barriers to trade in
environmentally beneficial goods and services, and also environmentally damaging
subsidies, for example in the agriculture and fishery sector.
Likewise we have led the debate on labor rights at the WTO, and found
specific opportunities such as our textile agreement with Cambodia, offering
greater access to the U.S. market in exchange for labor rights improvements in
Cambodia's garment sector. Our free
trade agreement with Jordan, currently under negotiation as part of the Middle
East peace process, will take this to a new level, as the first trade agreement
ever to include labor and environmental provisions.
In so doing, it will fully demonstrate the compatibility of open markets
and free trade with our ethical and humanitarian responsibilities for the
environment and social justice.
111.
AN INTEGRATED WORLD AND A STRONGER
PEACE
This agenda has made a contribution of central
importance to our economic goals: from export opportunities and rising living
standards in the present, to the technological issues of new economy, and to
opportunities for worldwide development, equity and social justice as well.
The trade agenda has done something else as well: consistent with the
philosophical goals and practical example set by Roosevelt and Truman in the
postwar era, trade agreements and economic integration have taken a central
place as we work toward a political architecture that will help us keep the
peace in the world after the Cold War.
This is a goal evident throughout the
Administration's most ambitious initiatives.
The reformed and strengthened trading system embodied by the WTO is
itself an example, providing the world with stronger rules that -- as we saw in
the two years of the Asian financial crisis -help to prevent political
instability by giving troubled countries access to the world markets necessary
for recovery in difficult times. The
Administration's regional initiatives in each part of the world are also
examples - the Asia-Pacific Economic Cooperation (APEC) forum; the Transatlantic
Economic Partnership with the European Union; the new trade and investment
relationship with Africa; regional integration in the Middle East; and most
ambitious among them, the growing hemispheric community and its potential to
fulfill a 200-year old dream, uniting the 34 democracies of the Western
Hemisphere in a Free Trade Area of the Americas.
And nowhere is this more nowhere more evident than in
our response to a challenge as profound as any the world has seen in half a
century: reintegrating China, Russia, and nearly 30 other nations in transition
from communist planning practices to the market into a global trading system and
a world trading economy. This is,
in a sense, the modem equivalent of the reintegration of Germany and Japan in
the postwar era; and looking back over eight years, we can see a decisive
advance.
For the new democracies of Europe and Asia, in
the years since the fall of the Berlin Wall trade policy has helped to cement
internal domestic economic reform, strengthen political stability and support
long-term growth. The negotiation
of WTO accession agreements, on the basis of substantial market-opening, and the
acceptance of global rules by the applicants, has helped build market economies,
promote the rule of law and spur longer-term and more sustainable growth in nine
new democracies - Albania, Bulgaria, Croatia, Estonia, Georgia, Kyrgyzstan,
Latvia, Mongolia and Slovenia - and more are to come, as WTO talks move ahead
with Russia, Ukraine, Armenia and others.
Much further east, we have taken the decisive steps
toward normalized trade with the nations of Indochina.
We have concluded major trade agreements with Cambodia and Laos; and put
the capstone in place with last July's landmark bilateral US-Vietnam market
access agreement. And this will
close the book on the Vietnam War-era, in a fashion that both cements peace and
reconciliation with these nations, and contributes to greater economic freedom
and opportunity for their people.
And finally, we return to our point of departure.
China's WTO accession, together with PNTR,
constituted up perhaps the most important American trade and foreign policy
debate of the past decade. It is a
landmark achievement in concrete terms: a comprehensive agreement covering
virtually every part of China's economy; and a Congressional debate ending in
the full normalization of our trade relationship. And it is also a symbolic achievement, as the world's largest
nation -- for so long a challenger to the vision of open markets, mutual benefit
and integration American trade policy has served -returns to the trading system
it helped to create in the years before the communist revolution.
Over the coming years, this agreement will open
China's economy to the world more fully than at any time in the modem era, and
launch China's most important domestic economic reforms in more than two
decades. In doing so, over time, it
will strengthen the rule of law throughout China, and give China and its people
far greater contacts with the outside world, complementing our work in the cause
of human rights. And it will serve
America's fundamental strategic interest as it integrates China more fully into
the Pacific regional and world economies, complementing our Asian alliances and
diplomacy to strengthen the chance of peace.
CONCLUSION
That brings us to the present; and from here we can
survey the challenges of the new decade. The strategic opportunities and general
outlines of policy are already clear: the further
opening and reform agricultural and services trade; Russia's integration
into the trading system; the framework of rules for the emerging networked world
economy; the extraordinary opportunity of a community of open trade throughout
the Western hemisphere.
This will be an agenda as demanding as that we began in 1993.
But Americans will take it up with some advantages we did not have then:
a healthier economy, a more confident public, and a stronger and more secure
nation. We have these blessings in
part because Americans, at a moment of promise and danger, once again made the
more courageous, more generous and wiser choice.
And let me close with that.
Thank you very much.